EU stands ready to support developing countries realize the benefits of a WTO Trade Facilitation Agreement

Development Commissioner Andris Piebalgs and Trade Commissioner Karel De Gucht have joined forces to help secure a WTO Trade Facilitation Agreement as part of global efforts to increase trade's contribution to development. The EU's support responds to demands from Least-Developed Countries (LDCs) for help to make the most of the deal, which could be agreed at the WTO's 9th Ministerial Conference in December 2013.

"I see only good opportunities", said EU Trade Commissioner Karel De Gucht. "Trade facilitation is about better customs procedures, cutting red tape, fighting corruption, and cutting costs for business. Cutting the cost of trade by just 1% would increase worldwide income by over €30 billion and two thirds of this would go to developing countries. Getting agreement in the WTO on trade facilitation would also send a powerful signal about the strength of the multilateral trade system and its ability to produce tangible results for the international community."

Development Commissioner Andris Piebalgs added, "Making it easier and cheaper to trade will help developing countries to better integrate in regional and global trade system. This will contribute to facilitate trade development and diversification, enhance job-creation and the wider sharing of the benefits of international trade. Reducing trade costs effectively require targeting of the binding constraints and proper sequencing of reforms. I therefore invite our partners to formulate trade facilitation plans with clear, specific and targeted requests for support.Within its overall Aid for Trade commitments, the EU stands ready to contribute its fair share and provide continued and substantial support for trade facilitation."

Trade facilitation refers to measures aimed at simplifying, modernising and harmonising merchandise import, improving tax collection at the border, export and transit procedures, especially customs requirements. Possible measures include simplifying rules, reducing the number of and standardising custom forms, and computerisation. The WTO Trade Facilitation Agreement could create an international framework for reforms. The EU hopes that such a deal could be adopted at the WTO's 9th Ministerial Conference in Bali, Indonesia on 3-6 December 2013.

EU has started working on the allocation of its development aid for the period 2014-2020, time is ripe for our partners to reflect about their trade needs in their priorities with the EU.

Background

Today, there is a yawning gap between developed and developing countries when it comes to border procedures. On average, OECD countries demand five documents at customs and it takes them 10 days to clear goods at a cost of about €735 per container. In contrast, African countries require on average twice as many documents, up to 35 days to clear exports and 44 days to clear imports, at an average cost per container of €1,285 for exports and €1,535 for imports1. The OECD estimates that reducing global trade costs by 1% would increase world-wide income by more than USD 40 billion, 65% of which would go to developing countries.2

Several developing countries have already carried out reforms. For a relatively modest investment of about €2-8 million, the benefits can be huge. According to the 2011 Global Aid for Trade Review, customs reform in Cameroon increased revenues by 12%; in Mozambique the figure was 50% in two years despite big tariff cuts. In Mozambique goods now clear customs in two to five days compared to 30 days before. In Sub-Saharan Africa cutting time spent at the border by 5% could achieve a 10% increase in formal intra-regional trade and revenue losses from inefficient border procedures are put at over 5% of GDP.

The cost of implementing trade facilitation reforms is relatively modest, though costs will vary from country to country. The World Bank3 has found country costs ranging from $3 to $11 million and OECD4 from $3.5 to $19.7 million.

Trade facilitation falls under Aid for Trade, which covers all financing for trade or trade-related activities. The EU and its Member States are the largest provider of Aid for Trade in the world, despite the current economic crisis. In 2010, they accounted for around a third of the total in committing some €10.7 billion. In the context of the existing Multiannual Financial Framework, and as part of their 2007 Aid for Trade Strategy and G20 commitment, EU and its Member States have made commitments that Aid for Trade would be maintained beyond 2011 at levels that, at least, reflect the average of the years 2006-2008, and that more resources should be directed towards LDCs. The EU and its Member States have committed themselves to together spend €2 billion a year on Trade-Related Assistance by 2010, with €1 billion from Member States and €1 billion from the EU. Between 2007 and 2010, the EU provided on average €70 million of trade facilitation support every year. Average Member State contributions raised the figure to €125 million per year.